EMPLOYMENT AGREEMENT
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This
Agreement is made and entered into, effective as of January 1, 2008, by and
between National Rural Utilities Cooperative Finance Corporation, a District
of
Columbia cooperative corporation ("CFC") and Xxxxxxx X. Xxxxxxxx (the
"Executive").
WHEREAS,
CFC desires to retain the Executive as its Governor and Chief
Executive
Officer under this Agreement for the period provided for in this Agreement,
and
the Executive is willing to serve in the employ of CFC on a full-time basis
for
such period, upon such terms and conditions as are provided herein;
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the parties hereby
agree as follows:
1. Employment.
Subject
to and upon the terms and conditions herein provided, CFC hereby agrees to
employ the Executive and the Executive hereby agrees to be employed by CFC
for
the Term of Employment, as defined in Section 3 hereof.
2. Position
and
Responsibilities. During the Term of Employment hereunder, the
Executive shall be employed as the Chief Executive Officer of CFC, and/or in
such other senior executive capacity or capacities as may be mutually
satisfactory to the Executive and CFC. The Executive will be the senior
executive officer of CFC, reporting only to the Board of Directors of CFC (the
"Board"), and all other officers of CFC shall report to the
Executive
or to other officers designated by the Executive. The Executive shall, at the
request of the Board, serve as an officer or director of any subsidiary or
affiliated entity of CFC.
During
the Term of Employment, except as hereinafter provided and except for vacation,
holidays observed by CFC and periods of illness, the Executive agrees to devote
substantially all of his business time and attention to carrying out his duties
and responsibilities under this Agreement and shall use his best efforts, skills
and abilities to further the interests of CFC. The Executive shall be permitted,
to the extent such activities do not substantially interfere with the
performance of the Executive's responsibilities and duties hereunder, (i) to
manage his personal, financial and legal affairs and (ii) to serve on civic,
charitable, religious or educational boards or
committees However, the Executive may not serve on the board of
directors of any other business entities without the prior express written
consent of the Board and subject to such reasonable limitations as may be
imposed by the Board in granting such consent.
3. Term
of
Employment. The Term of Employment under this Agreement shall
commence as of January 1, 2008, and shall terminate on February 29, 2012 unless
earlier terminated as provided in Section 6 below or extended as provided in
the
following sentence (the "Term of Employment"). The Term of
Employment shall automatically be extended on
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March
1, 2012 and each subsequent March 1 for an additional year unless, not later
than 6 months prior to any such date, either party to this Agreement shall
have
given written notice to the other party that he or it does not wish to extend
or
further extend the Term of Employment.
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. Compensation. For all
services rendered by the Executive during the
Term
of Employment, CFC shall pay the Executive as compensation (i) a base salary,
in
periodic installments in accordance with CFC's usual payroll practice for its
senior executives, at an annual rate of no less than $710,000 (the "Base
Salary"), (ii) an annual incentive (the "Short-Term Incentive") pursuant to
the
terms set forth in the CFC Annual Incentive Plan; and (iii) a long-term
incentive pursuant to the terms of the CFC Long Term Incentive Plan. During
the
Term of Employment, the Executive's Base Salary shall be reviewed for possible
increase at least annually, and the term "Base Salary" shall thereafter refer
to
the Base Salary as so increased.
5. Executive
Benefits,
Perquisites and Expenses.
5.1 CFC
Plans. The
Executive shall be entitled to participate in all CFC health, accident, life
insurance, savings, retirement, disability and other benefit plans, programs
or
practices from time to time in effect for senior executives of CFC at least
to
the same extent as other senior executives (or, where applicable, retired senior
executives) of CFC, including, without limitation, CFC's Annual Incentive Plan,
Long-Term Incentive Plan, Pension Restoration Deferred Compensation Plan and
Pension Restoration Severance Pay Plan.
5.2 Vacations. The
Executive shall be entitled to an amount of paid vacation during each
twelve-month period during the Term of Employment equal to the maximum amount
of
vacation allowed for any full-time employee of CFC (but not less than five
weeks
of paid vacation earned uniformly during each such period), plus such holidays,
sick leave and other time off as are established by the policies of CFC. Unused
days of vacation may be carried over to subsequent years, provided, however,
that amounts
of unused vacation in excess of 240 hours at the close of each such twelve-month
period shall be settled in cash at the current rate of pay. The Executive shall
receive within thirty (30) days after his employment terminates, a payment
(based on the Executive's Base Salary in effect on the date the Executive
terminated employment with CFC) for any accrued but unused vacation at the
termination but not in excess of 12 weeks regardless of the reason for such
termination of employment of the Executive.
5.3 Perquisites;
Expenses. During the Term of Employment, the
Executive
shall be entitled to receive such perquisites as CFC may determine to provide
to
its senior executive officers, and CFC shall reimburse the Executive for all
reasonable and documented expenses incurred by the Executive in connection
with
the performance of the Executive's duties hereunder, including, an annual
allowance approved by the Board of Directors to cover expenses incurred as
a
result of the attendance by the Executive's wife at a function or meeting where
the Executive determines that her attendance is appropriate.
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5.4 Automobile.
During
the Term of Employment, CFC shall provide the Executive with an annual allowance
approved by the Board of Directors to cover all reasonable expenses (including,
insurance, repairs, maintenance, fuel and oil) for an automobile selected by
the
Executive.
5.5 Executive
Health
Physical. During the Term of Employment, the
Executive
shall be entitled to have an executive health physical on an annual basis,
at a
medical institution of his choice within the continental US. The
health physical shall be comprehensive, and consistent with the standards that
are established practice within the medical profession at the time. All
diagnostic and ancillary fees that qualify will be submitted by the Executive
for insurance reimbursement, and all remaining fees for the health physical
services will be either paid directly by CFC or reimbursed to the
Executive.
6. Payments
to the Executive
Upon Termination of Employment.
6.1 Termination
by
CFC.
(a) CFC
shall have the right to terminate the Executive's employment at any time during
the Term of Employment with or without "Cause", as defined in Section 6.5(a).
If, during the Term of Employment, CFC terminates the employment of the
Executive under this Section 6 without Cause, the Term of Employment shall
terminate immediately thereafter, and:
(i)
CFC shall pay the Executive such Base Salary provided herein as he may be
entitled to receive for services rendered prior to the date of such
termination;
(ii)
CFC shall pay the Executive for any accrued but unused vacation as set forth
in
Section 5.2 and for any properly-documented unreimbursed expenses;
(iii)
CFC shall pay the Executive the benefits which the Executive
is,
or may become, entitled to receive under the terms and conditions of such CFC
plans as are in effect from time to time; and
(iv)
CFC shall pay the Executive a single lump-sum payment
equal
to the product of (a) three and (b) the sum of (1) his annual Base Salary at
the
rate in effect on the date of such termination, and (2) the Executive's
Short-Term Incentive award, if any, for the year prior (or annual bonus, if
any,
for 2007) to the year in which such termination occurs.
(b) If,
during the Term of Employment, CFC terminates the employment of the Executive
for "Cause", as defined below, the Term of Employment shall terminate
immediately thereafter, and CFC shall pay the Executive such compensation as
is
set forth in Section 6.1(a)(i), (ii) and (iii) herein.
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6.2 Termination
by the
Executive.
(a) The
Executive has the right to terminate his employment hereunder at any time during
the Term of Employment upon not less than 90 days prior written notice to CFC,
provided, however, that if the Executive wishes to terminate his employment
for
"Good
Reason"
as defined in Section 6.5(b), the Executive must notify CFC in writing of such
intent within 30 days of the event or events that he believes constitute Good
Reason and such notice must specify such events in reasonable detail. If during
the Term of Employment the
Executive's
employment is terminated for "Good Reason", as defined below, the Term
of
Employment
shall terminate immediately thereafter, and CFC shall pay the Executive such
compensation as is set forth in Section 6.1(a)(i)-(iv).
(b) If
during the Term of Employment the Executive terminates his employment for other
than "Good Reason", as defined below, the Term of Employment shall terminate
immediately thereafter, and CFC shall pay the Executive such compensation as
is
set forth in Section 6.1(b).
6.3 Disability.
Upon the
"Disability", as defined in Section 6.5(c), of the Executive during the Term
of
Employment, and for the period of Disability, in addition to any other benefits
to which he may be entitled pursuant to this Agreement, but in lieu of his
Base
Salary and any Short-Term Incentive award, the Executive shall receive through
the end of the Term of Employment or, if earlier, the Executive's date of
recovery, actual termination of employment (in which case the applicable
provisions of Section 6.1 or 6.2 shall apply and this Section 6.3 shall cease
to
apply) or death (in which case Section 6.4 and any other relevant provisions
shall apply) an annual Disability Benefit equal to 60% of the Base Salary
the
Executive
was receiving at the commencement of the Disability and 60% of his target award,
if any, under CFC's Short-Term Incentive Plan for the year in which the
Executive became disabled. Payment of the Disability Benefit shall be in equal
monthly installments, and such payments shall be reduced by the monthly payments
received by the Executive under any other
CFC-sponsored
disability plan or program and the monthly disability benefits received by
the
Executive pursuant to the applicable provisions of the Social Security Act.
During the period that Disability Benefits are payable to the Executive, he
shall continue to participate in CFC's plans described in Section 5.1 (other
than the Short-Term Incentive Plan and the Long-Term
Incentive
Plan) as if he had continued to be an active CFC employee and as if he had
received
60%
of the Base Salary then in effect under Section 4 (and 60% of his target award,
if any, under the CFC Annual Incentive Plan for the year in which he became
disabled).
6.4 Death.
In the event
of the termination of the Executive's employment by reason of death during
the
Term of Employment, the Executive's "Designated
Beneficiary",
as defined below, shall be entitled to receive
(i)
payment of the Executive's unpaid Base Salary through the date of
death;
(ii)
payment of a pro-rated Short-Term Incentive award, if any, for the year of
the
Executive's death (at 100% of the target award);
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(iii)
the lesser of (a) a lump sum payment equal to one year's Base
Salary
at the rate in effect on the date of death or (b) the Base Salary that would
have been paid to the Executive in the remaining period of the Term of
Employment prior to death (but in no case less than the Base Salary that would
have been paid to the Executive for a 6 month period);
(iv)
reimbursement for any properly-documented unreimbursed expenses;
and
(v)
such survivor benefits and payments for the Executive's family or with respect
to the Executive that are provided, or may be provided, under CFC's plans
described in Section 5.1 determined in accordance with the then applicable
provisions of such plans, programs or arrangements.
6.5 Definitions.
(a) "Cause".
For purposes
of this Agreement, Cause shall mean (i) the willful and continued failure by
the
Executive, as determined in good faith by two-thirds of the members of the
Board
(after notice to the Executive and providing the Executive an opportunity to
meet with the Board), to perform his duties under this Agreement or comply
with
written policies of CFC, or (ii) willful conduct materially injurious to CFC
or
(iii) conviction of a felony involving moral turpitude, provided, however,
that
any act or omission by the Executive shall not fall within the scope of this
Section 6.5(a)(i) and (ii) if it was done or omitted to be done by the Executive
in good faith and with a reasonable belief that such action or omission was
in
the best interests of CFC.
(b) "Good
Reason". For
purposes of this Agreement, Good Reason shall mean, without the prior written
consent of the Executive, (i) a reduction in the rate of the
Executive's
Base Salary, (ii) a decrease in the Executive's titles, duties or
responsibilities hereunder or the assignment of new responsibilities hereunder
which, in either case, is materially less favorable to the Executive when
compared to the Executive's titles, duties and responsibilities which were
in
effect immediately prior to such assignment, or (iii) the relocation of CFC's
principal office or the relocation of the Executive to a location more than
50
miles from the principal office of CFC on the date of this Agreement; provided,
however, that the term "Good Reason" shall not include the occurrence of any
of
the above if such occurrence is remedied by CFC within 20 business days after
receipt by CFC of the Executive's written notice of resignation for Good Reason
under Section 6.2(a) setting forth in specific detail the facts and
circumstances resulting in the Good Reason upon which his resignation is
based.
(c) "Disability".
For
purposes of this Agreement, Disability shall mean that the Executive has not
performed his full-time duties with CFC for three consecutive months as a result
of his incapacity due to physical or mental illness and within thirty (30)
days
after written notice of such incapacity is given to the Executive he shall
not
have returned to the full-time performance of his duties hereunder.
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(d) "Designated
Beneficiary". For purposes of this Agreement the
Designated
Beneficiary shall be any person designated by the Executive in a written
instrument signed by the Executive and delivered to CFC to be the beneficiary
of
payments to be made by CFC hereunder upon the death of the Executive if such
person survives the Executive. Any
Designated
Beneficiary may be changed by the Executive at any time and from time to time
by
a written instrument signed by the Executive and delivered to
CFC. If no Designated Beneficiary survives the Executive, the
Designated Beneficiary shall be the estate of the Executive.
7. No
Mitigation. CFC
agrees that if the Executive's employment is terminated during the Term of
Employment, the Executive is not required to seek other employment or to attempt
in any way to reduce the amounts payable and the benefits to be provided to
the
Executive by CFC under this Agreement. Further, the amount or nature of any
such
payment or benefit to be paid to or with respect to the Executive shall not
be
reduced by any compensation earned by the Executive as a result of employment
by
another employer, by retirement benefits, or offset against any amount claimed
to be owed by the Executive to CFC or any of its subsidiaries or
otherwise.
8. Confidential
Information. The Executive shall not at any time during his employment
with CFC or following termination or expiration of this Agreement, directly
or
indirectly, disclose, publish or divulge to any person (except in the regular
course of CFC's business or as required by law or regulations), or appropriate,
use or cause, permit or induce any person to appropriate or use, any
proprietary, secret or confidential information of CFC including, without
limitation, knowledge or information relating to its copyrights, trade secrets,
business methods, the names or requirements of its customers, vendors,
contractors, agents, dealers and distributors or the prices, credit or other
terms extended or granted to any of such persons, all of which the Executive
agrees are and will be of great value to CFC and shall at all times be kept
confidential. Upon the termination of the Term of Employment
hereunder, the Executive shall promptly deliver or return to CFC all materials
of a proprietary, secret or confidential nature relating to CFC together with
any other property of CFC which may have theretofore been delivered to or may
then be in the possession or control of the Executive. CFC and
the Executive agree that the provisions of this Section shall survive the
termination of the Executive's employment hereunder.
9. Indemnification.
CFC
agrees that if the Executive is made, or is
threatened
to be made, a party to any action or proceeding, whether civil or criminal,
by
reason of the fact that he is or was a director or officer of CFC or any of
its
subsidiaries or, at the request of CFC, serves or served any other corporation,
partnership, joint venture, trust or other enterprise in any capacity, CFC
shall
indemnify him to the fullest extent permitted by the Charter and By-Laws of
CFC
or, if greater, by the applicable laws of the State of Virginia, against all
costs, expenses, liabilities and losses reasonably incurred or suffered by
the
Executive in connection therewith. CFC shall advance to the Executive all
reasonable costs and expenses incurred by him in connection with any such
proceeding upon receipt of an itemized list of such costs and
expenses.
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10. Legal
Fees and
Expenses. In the event that a claim for payment or
benefits under this Agreement is disputed, the Executive shall be reimbursed
for
all reasonable attorney fees and expenses incurred by the Executive on a
proportionate basis in pursuing such claim, to the extent that the Executive
is
successful as to all or part of the disputed claim by reason of litigation,
arbitration or settlement.
11. Amendment;
Waiver. This Agreement contains the entire agreement of
the parties with respect to the matters set forth herein, and may only be
amended by subsequent written agreement of the parties hereto. All
prior agreements between the Executive and CFC, whether in writing or not,
relating to terms and conditions of employment are hereby canceled. No waiver
by
CFC of any breach by the Executive of any term, condition or provision of this
Agreement to be performed by the Executive shall be deemed a waiver of a similar
or dissimilar condition or provision at the same or prior or subsequent
time.
12. Binding
Effect. The
Executive's rights and obligations under this
Agreement
shall not be transferable by assignment or otherwise, such rights shall not
be
subject to commutation, encumbrance, or the claims of the Executive's creditors,
and any attempt to do any of the foregoing shall be null and void. The
provisions of this Agreement shall be binding upon and inure to the benefit
of
the Executive and his heirs, beneficiaries and personal representatives, and
shall be binding upon and inure to the benefit of CFC and its successors or
assigns.
13. Governing
Law;
Severability. Except as otherwise set forth herein, this
Agreement is governed by and is to be construed and enforced in accordance
with
the laws of the State of Virginia without regard to principles of conflicts
of
law. If any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be, unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by
law.
14. Withholding
of Taxes.
CFC may withhold from any compensation payable under this Agreement all federal,
state, city, or other taxes as shall be required pursuant to any law, regulation
or ruling.
15. Counterparts.
This
Agreement may be executed in several counterparts, each of which shall be deemed
to be an original but all of which together will constitute one and the same
instrument.
16. Headings.
The
headings contained in this Agreement are for reference purposes only and shall
not be deemed to be part of the Agreement or to affect the meaning or
interpretation of this Agreement.
17. Notices.
Any notice
given to either party hereto shall be in writing and shall be deemed to have
been given when delivered personally or sent by certified or registered mail,
postage prepaid, return receipt requested, duly and properly addressed to the
party concerned at the address indicated below or to such changed address as
party may subsequently give notice of:
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If
to CFC:
National
Rural Utilities
Cooperative
Finance Corporation
Woodland
Park
0000
Xxxxxxxxxxx Xxx
Xxxxxxx,
Xxxxxxxx 00000
Attn:
President
If
to the Executive:
Xx.
Xxxxxxx X. Xxxxxxxx
18.
Enforcement of
Agreement. The respective rights and obligations of the parties hereunder
shall survive any termination of this Agreement or the Term of Employment for
any reason to the extent necessary to obtain the intended provision of such
rights and the intended performance of such obligations.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
and year first above written.
NATIONAL
RURAL UTILITIES COOPERATIVE
FINANCE
CORPORATION
By:
/s/ Xxxxxx Xxxxxx
President
/s/
Xxxxxxx X. Xxxxxxxx
Xxxxxxx
X. Xxxxxxxx
